Walker unveils plan to eliminate tax on HSA contributions

At issue is how much the exemption would save consumers, costs to the state

Governor-elect Scott Walker speaks to reporters at the Wisconsin Realtors Association conference in Waukesha. He addressed the importance of Realtors in getting out the word of a more business-friendly Wisconsin under his leadership. Walker also spoke about the withdrawal of high-speed rail funding and "right-to-work" laws. Credit: Michael Sears

Waukesha — Governor-elect Scott Walker said Thursday he would propose removing state income taxes on health savings accounts during a special economic development session in January.

Republicans have tried for years to eliminate the tax on contributions to HSAs, and next month they will have the political muscle with majorities in the Assembly and the Senate.

Wisconsin is one of only four states that still tax HSA contributions.

"Employees and small businesses need to have the flexibility provided by HSAs, and there's no reason they should be taxed," Walker said. "This will make health care more affordable for folks who use HSAs."

Walker spoke to the Wisconsin Realtors Association at the Country Springs Hotel.

His transition office said the tax exemption would save consumers $4 million to $8 million a year, but other estimates show HSA exemptions would cost more.

The Legislative Fiscal Bureau estimated in 2009 that a bill creating HSA deductions would decrease state revenue by $11.2 million in fiscal 2010, $14.8 million in fiscal 2011 and $19.8 million in fiscal 2012.

Walker's spokesman Cullen Werwie said the governor-elect's estimate was based on figures from the same agency in 2005.

In 2005, Republicans passed a bill on HSAs, only to have it vetoed by Gov. Jim Doyle, a Democrat.

Doyle expressed concerns about costs and said it didn't address the problem of providing access to health care for the poor.

Walker's proposal on HSAs comes as the state faces a budget shortfall this year of $150 million or more.

HSAs allow employers and families to put aside money for health care costs and give consumers an incentive for keeping their health care spending low. The accounts are typically used with health care plans with high deductibles. Contributions already receive federal income tax deductions.

Sen. Alberta Darling (R-River Hills), an incoming co-chairwoman of the Legislature's budget committee, is a past author of similar legislation. In an interview this week, she said it could play a role in reducing the cost of health care.

"It's perceived as a be-all and end-all," Darling said of the proposal. "It's not. But it's one tool in the toolbox."

Addressing the Realtors and afterward as he was meeting with reporters, Walker said:

• A special session on the budget and improving Wisconsin's business climate will last 30 to 45 days and include tax relief for small businesses, easing the regulatory burden on companies and tort reform.

"We really need to get public sector wages and benefits under control," he said. "If it's not tied into the budget and our jobs plans, we are really not going to be focused on other options out there."

On Tuesday, Walker said he would take steps to control public employee health and benefit packages as a means of reducing a projected $3.3 billion deficit in the next biennium. His initiatives could include decertification of unions or other steps to weaken the ability of workers to negotiate with the state.

• Every cabinet agency - especially at the Department of Natural Resources - should be "led by someone with a chamber of commerce mentality."

"I want someone who is going to conserve our natural resources, but do that in a way that is friendly and welcoming to our business," he said.

Lee Bergquist reported for this story in Waukesha and Jason Stein in Madison.

About Lee Bergquist

Lee Bergquist covers environmental issues and is author of "Second Wind: The Rise of the Ageless Athlete."

About Jason Stein

Jason Stein covers the state Capitol and is the author with his colleague Patrick Marley of "More than They Bargained For: Scott Walker, Unions and the Fight for Wisconsin." His work has been recognized by journalism groups such as the American Society of News Editors, the Society of American Business Editors and Writers, and the Association of Capitol Reporters and Editors.